AUSTRALIAN TAXATION OFFICE SUPPORTING BACKGROUND DOCUMENT TO THE

AUSTRALIAN TAXATION OFFICE

SUPPORTING BACKGROUND DOCUMENTTO THE

SUBMISSION TO THE FUEL TAXATION INQUIRY

FEBRUARY 2002

ATO Background Document: Fuel Taxation InquiryFebruary 2002

ATO SUBMISSION TO THE FUEL TAXATION INQUIRY

BACKGROUND DOCUMENT

The Australian Taxation Office

The Australian Taxation Office (ATO) is a statutory authority responsible for theadministration of Australia�s taxation system. With the recent addition of excisecollection to its role, the ATO is the Government�s principal revenue collectionagency. Current collections total approximately $140.6 billion a year, which is 96%of revenue collected by the Commonwealth.

Since the introduction of the goods and services tax (GST) in 2000, the ATO is alsocollecting a significant amount in GST revenue on behalf of the states andterritories, replacing many taxes formerly collected by state and territory revenueauthorities.

The ATO collaborates extensively with other agencies, both at Commonwealth andstate levels, to ensure the protection of government revenue, the reduction ofbenefit fraud, and the implementation of specific government policies.

Since 1999 the ATO has broadened its business responsibilities through theadministration of a number of payment schemes and the new benefit scheme for oilrecyclers (these are discussed further under part 3). These payments totalledalmost $2.7 billion last year.

The ATO not only collects taxes and makes business payments, but also seeks toensure that taxpayers have all the necessary information they need to comply withtax laws in line with service standards contained within the Taxpayers� Charter.

The ATO also utilises its expertise and community networks to support the deliveryof community benefit programs. In addition to our role in superannuation, we havesignificant responsibilities in relation to other schemes, including:

• Private Health Insurance;• Family Assistance Benefits;• Higher Education Contribution Scheme (HECS); and• Development Allowance Authority.

With the implementation of The New Tax System and Business Tax Reform, theATO is in a period of significant change. Our key priorities are:

• Improving our approaches to compliance to ensure budgeted revenue iscollected;

• Implementing tax reform efficiently with minimal disruption to clients;• Addressing revenue leakage through the cash economy and aggressive tax

planning;• Addressing the revenue challenges posed by globalisation and Internet business

transactions; and• Managing constructive relationships with the community, assisting individuals

and businesses to understand their tax obligations.


The administrative structure of the ATO comprises eight business lines, eachmanaging specific areas of taxation law. The GST, Large Business andInternational, and Excise business lines are responsible for the collection of fueltaxation revenue, while the Excise area also administers the payment schemes.


PART 1 FUEL TAXATION

1.1 GST

In July 2000, the Government implemented A New Tax System (ANTS). This reformdramatically changed the Australian taxation system.

A major element of this system is a goods and services tax (GST) which is a broad-based tax of 10 per cent on the supply of most goods and services.

GST is paid at each step in the supply chain, with businesses that are registered forGST charging GST in the price of taxable goods or services they supply. Thebusiness is entitled to claim input tax credits from the ATO for any GST they havepaid for the acquisition of goods or services that relate to the making of taxable orGST free supplies. The GST liability flows along the supply chain and rests with thesupplier of the taxable goods or services, not the consumer.

All petroleum products attract 10 per cent GST.

1.2 Petroleum Resource Rent Tax

The Petroleum Resource Rent Tax (PRRT) took effect from 15 January 1988. PRRTapplies to all offshore petroleum production, with the exception of the North WestShelf project area.

PRRT is levied at a rate of 40 per cent and is imposed on the taxable profits relatingto a petroleum project. Taxable profit is calculated from the project�s receipts afterall project and other exploration expenditures have been recovered, and a minimumreturn made (as the minimum return allows for financing costs, actual financingcosts are not deductible).

PRRT is paid in quarterly instalments and is administered by the Large Businessand International business line of the ATO.

Through its key features, PRRT is designed to provide a fiscal regime thatencourages the exploration and production of petroleum, while ensuring anadequate return to the community for the exploitation of its non-renewableresources. In the 2000-2001 financial year, PRRT collections totalled over $2 billion� the majority of which came from Bass Strait.

1.3 Excise

The most recent judicial authority on the nature of an excise in Australia is thedecision of the High Court in Ha and Lim v State of New South Wales & Ors; WalterHammond & Associates v State of New South Wales & Ors Defendants made on5 August 1997:

��duties of excises are taxes on the production, manufacture, sale or distributionof goods, whether of foreign or domestic origin. Duties of excise are inland taxes incontradistinction from duties of customs which are taxes on the importation ofgoods. Both are taxes on goods, that is to say, they are taxes on some step taken indealing with goods.�


Excise is currently imposed on domestic production of petroleum, oils andlubricants, tobacco and alcoholic products (other than wine). It is levied on theproduction of domestic goods and payment may be deferred until the products�enter into home consumption� � which is usually when the product is available forsale and removed from the manufacturer�s premises. There is an equivalentcustoms duty levied on similar imported goods.

Excise has been levied on a number of commodities since 1901. Collection of exciseis an efficient way to collect taxes as it is applied at the point where the number oftaxpayers is limited, minimising administrative effort.

In the financial year ending 30 June 2001, the total excise collected by theCommonwealth was $19.3 billion, constituting 13% of total Commonwealthrevenue.

PART 2 FUEL EXCISE

Excise on petroleum products constituted $11.9 billion in the year ending30 June 2001, which is 63% of the total revenue from excise.

In the March 2001 quarter, the four major petroleum companies paid 95.1% ofpetroleum excise revenue, while 32 smaller clients paid the remaining 4.9%.

Figure 1 illustrates the segments of revenue.

FIGURE 1 � Excise Revenue (for financial year ending 30 June 2001)

Other ATO revenue - $122 b Petroleum revenue - $11.9 b

Excise revenue - $19 b Other Excise revenue - $7.1 b

Note: GST revenue is not included in this figure. Crude Oil revenue is included in�other excisable products� for the purposes of the above illustration.

Crude petroleum oil from all onshore fields and from the North West Shelf fields inWestern Australia is excisable (all other off shore fields are subject to PRRT � seesection 1.2). Production excise duty is a rent on bountiful oil fields and is designedto compensate the Australian community for natural resources being harvested byprivate companies. Excise applies once a field has produced 30 million barrels.The rates are based on the value of sales of crude oil made in a producing region.


Excise on petroleum products has historically been levied at different ratesdepending on the intended �end use� of the product. The concessional rate ofexcise system structure has three levels:

• Products for use as fuel in an internal combustion engine (ICE) are taxed at thefull rate of excise. The principal products used in such applications are petroland diesel;

• Products for use as fuel in other than an ICE are taxed at a concessional rate.The principal products used in such applications are heating oil and kerosene;and

• Products not for use as fuel are excisable at a zero rate. These products includesolvents and mould release agents.

Certain alternative fuels, such as LPG (liquified petroleum gas) and CNG(compressed natural gas) are not subject to excise as they are not covered by theexcise tariff. Other products such as biodiesel, when blended with excisablepetroleum products become subject to excise. Ethanol used as a fuel is not subjectto this arrangement and hence the ethanol component of ethanol/petrol blends isfree of excise.

Current excise rates are detailed at Appendix A.

PART 3 PAYMENT SCHEMES

Over time, rebates, subsidies and grants have been introduced to assist certainindustry, business sectors or specific geographic communities. These variousassistance programs are described in this paper as payment schemes. Successivegovernments and changing policy priorities have shaped the payment schemes, inparticular the Diesel Fuel Rebate Scheme.

In the financial year ending 30 June 2001, payments made under all paymentschemes totalled almost $2.7 billion. This amount comprised approximately500,000 claims made by around 152,400 clients. Not all clients submitted a claimin the 2000 � 2001 financial year.

These payments were made to clients registered for the Diesel Fuel Rebate Scheme(DFRS), the Diesel and Alternative Fuels Grants Scheme (DAFGS), the Fuel SalesGrants Scheme (FSGS) and the Product Stewardship (Oil) Scheme (PSO).

FIGURE 2 � Payment Scheme Profile (for financial year ending 30 June 2001)

Scheme No ofclients

No ofclaims

Averagepayment/claim ($)

Totalpayments

($m)Diesel Fuel Rebate Scheme 135,702 216,223 8832 1909.6Diesel and Alternative Fuels GrantsScheme

76,782 239,694 2329 558.3

Fuel Sales Grants Scheme 4,336 43,081 5134 221.2Product Stewardship (Oil) Scheme* 34 92 30,434 2.8Total Excise Business Payments 216,854 499,090 5393 2691.9


NB: this table includes only active or operative clients, some of who may not have lodged a claim in the last financialyear. Some clients may also be registered under more than one scheme. The number of claims includes only claims paid.

*Product Stewardship Oil commenced January 2001, thus payments are for January-June 2001 period only.

The Product Grants and Benefits Administration Act 2000 (PGBAA) was developed toprovide a generic framework for the administration of payment schemesadministered by the ATO. Each of these schemes has its own separate entitlementact, but shares the core administrative and compliance requirements under thePGBAA. The PGBAA also links to the Taxation Administration Act 1953, thusaligning specific administrative provisions with wider ATO standards.

Currently the Fuel Sales Grants Scheme (FSGS) and the Product Stewardship (Oil)Scheme (PSO) are administered under the PGBAA.

The other payment schemes are administered under different legislation, havedifferent eligibility, guidelines, record keeping requirements and rates. All of thepayment schemes however operate on a self assessment basis. Any entity claiminga grant or rebate is required to maintain records specific to each scheme tosubstantiate their claim.

All payment schemes, except DFRS, are subject to penalties and a general interestcharge (GIC), although the nature of penalties differs across the payment schemes.

All grants and rebates made under payment schemes are considered �income� forthe purposes of other taxation treatments, but are not subject to GST.

The Government has indicated that the DFRS and the DAFGS will be replaced bythe Energy Grants (Credits) Scheme (EGCS). The purpose of the EGCS is to provideactive encouragement for the move to the use of cleaner fuels by measuresadditional to those currently outlined in the Diesel and Alternative Fuels GrantsAct 1999.

The EGCS provides an opportunity to streamline the administration of the existingpayment schemes by decreasing the complexity and ambiguities that currentlyexist. The streamlining of payment schemes would also reduce the cost ofcompliance to the client and increase community confidence in the ATO. ThePGBAA and the work of the Business Redesign Project (see part 6.1.1) moves thesepayment schemes closer to the Unified Grants Code and is complemented by thegeneric payments system (part 6.1.3).

3.1 Remissions and Refunds

In conjunction with payment schemes there are remission and refundcircumstances relating to petroleum excise, which are prescribed in the ExciseRegulations 1925, most commonly regulation 50.

A remission circumstance is where duty that is payable is foregone or waived. Arefund circumstance means that duty that has been paid is returned to the owner.Revenue foregone under remissions and refunds during the 2000-2001 financialyear for petroleum products totalled $269 million. Currently there are 46 differentand extremely specific circumstances under which an Excise refund or remissionmay be made. The most common circumstances relate to solvent and burner fuelapplications, including �light fuel oil� for burner fuel use, kerosene for some specificfuel uses, and diesel and petrol substitutes for non fuel uses.


There are considerable complexities surrounding this refund and remission system,which impose administrative burdens on the ATO, suppliers of product and the460 clients currently holding one or more remission certificates.

3.2 Diesel Fuel Rebate Scheme (DFRS)

The ATO has administered DFRS under the Excise Act 1901 and theCustoms Act 1901 since the transfer of functions from the Australian CustomsService (this is discussed further in part 4). From July 2000 the scheme waswidened to include rebates for rail and marine transport as well as for the use of�like fuels� such as heavy fuel oil and light fuel oil (primarily used in marinetransport).

The scheme effectively means that there is no economic incidence of excise on dieseland like fuels used for certain off-road purposes by providing a full rebate of exciseand customs duty.

The DFRS commenced in 1982. It replaced a former scheme based on exemptioncertificates which dated back to the 1950s. The original scheme provided for dieselfuel to be purchased duty free for off road use. It appears to have been based onthe policy of not requiring off road users to pay the road user charge (which was thebasis of petroleum excise at that time).

More recently the purpose of this rebate has been to reduce business input costs inindustries such as mining, agriculture, forestry, fishing, rail transport, and marinetransport, consistent with the Government�s broader policy objectives.

The rebate rate per litre varies according to the amount of excise paid and the fueltype (see attached excise duty rates at Appendix A). Current policy is for the rebaterate to be set at the actual excise rate. However, the rate at which DFRS is actuallypaid is the average of the declared rates applicable on the last day of each of thepreceding 6 months prior to the date of receipt of the claim. This system isdesigned to smooth out rate changes and discourage clients from stockpiling claimsto take advantage of new rates. Since the cessation of indexation on petroleumfuels, the excise duty is currently the same as the rebate paid.

The Deputy Prime Minister, John Anderson, announced on 30 October 2001 theGovernment�s plan to extend the Diesel Fuel Rebate Scheme to retail and hospitalitybusinesses who have no access to the electricity grid. This extension will enablesmall retail/hospitality businesses to claim rebates in relation to their commercialoperations. The details of this initiative are currently under consideration.

3.3 Diesel and Alternative Fuels Grants Scheme (DAFGS)

The ATO has administered DAFGS under the Diesel and Alternative Fuels GrantsScheme Act 1999 since its introduction in July 2000. Generally, the grant isavailable to businesses and other entities for the on road use of diesel andalternative fuels in vehicles that have a gross vehicle mass (GVM) of 4.5 tonnes ormore and are registered for use on public roads. Eligibility is also subject to definedmetropolitan area boundaries.

A grant is payable for all on road business use of diesel and alternative fuels invehicles of 20 tonnes GVM or more.


For vehicles between 4.5 and 20 tonnes GVM a grant is only payable for diesel andalternative fuels used in vehicles for transporting passengers and goods on eligiblejourneys. Eligible journeys are those undertaken:

• Between a point outside a metropolitan area and another point outside ametropolitan area; and

• Between a point outside a metropolitan area and a point inside a metropolitanarea (and vice versa).

The metropolitan areas have been defined by regulation and cover the following:

• The Newcastle-Sydney-Wollongong metropolitan area;• The Melbourne-Geelong metropolitan area;• The Sunshine Coast-Brisbane-Gold Coast metropolitan area;• The Perth metropolitan area;• The Adelaide metropolitan area; and• The Canberra metropolitan area.

Vehicles operated by a primary production business, including contractors or sub-contractors transporting goods solely on behalf of primary production businesses,are not subject to the metropolitan area limitations applying to vehicles under20 tonnes.

Buses utilising alternative fuels and emergency vehicles are also not covered by themetropolitan area limitations.

Fuels eligible for the grant are diesel (including diesel blended with other fuels),CNG, LPG, recycled waste oil, ethanol and canola oil. A grant rate has not been setfor canola oil or recycled waste oil as these products are not sold in the marketplace as fuel. Additional alternative fuels can be prescribed by regulation.

The rate was originally set to reduce the effective excise to a level equivalent to anotional road user charge of 20 cents per litre. The rate of alternative fuels wasbased on maintaining price relativity to diesel at pre GST levels.

A recent amendment to the Diesel and Alternative Fuels Grants Act 1999 allows forsimpler calculation of eligible fuel by replacing the statutory formula with aregulation making provision that allows for different methods of calculating eligiblefuel to be prescribed.

3.4 Fuel Sales Grants Scheme (FSGS)

The ATO has administered FSGS under the Fuel Sales Grants Act 2000 and theProduct Grants and Benefits Administration Act 2000, since its introduction on1 July 2000. The scheme was introduced to compensate for the relatively higherGST component of the pump price of petrol in non-metropolitan and remote areas.

The scheme provides 1 cent and 2 cents per litre grants to non-metropolitan andremote petrol retailers respectively, and an additional 1 cent per litre grant toretailers in remote zones where petrol prices are continually over $1.21 per litre.The scheme was intended to deliver the Government�s promise that the pump priceof petrol need not rise as a result of the introduction of the GST.


The grant is passed onto consumers, and its impact is monitored by the AustralianCompetition and Consumer Commission (ACCC).

3.5 Product Stewardship (Oil) Scheme (PSO)

The ATO also administers the Product Stewardship (Oil) Scheme. This scheme wasintroduced as part of the Measures for a Better Environment package and isadministered by the ATO under the Excise Act 1901, Product Stewardship (Oil)Act 2000 and the Product Grants and Benefits Administration Act 2000. Theobjective of the scheme is to encourage environmentally and economicallysustainable reuse of waste oils. Environment Australia has the primaryresponsibility for the development of policy direction, with the ATO administeringthe scheme.

The scheme provides a levy-benefit arrangement. Producers of virgin oils andlubricants pay a levy by way of an excise, which currently funds the benefitpayments made to recyclers. This levy is approximately 5.3 cents perlitre/kilogram. The total levy collected for the 2000-2001 financial year was$11.95 million.

There are six eligible product categories which attract different rates of benefit.They are:

Item Category Benefit Rate(cents per litre)

1 Re-refined base oil (for use as a lubricant or a hydraulic ortransformer oil)

50

2 Other re-refined base oils (for example, chain bar oil) 103 Diesel fuels (to which the Excise Tariff 1921 applies) 74 Diesel extenders (filtered, de-watered and de-mineralised) 55 High grade industrial burner oils (filtered, de-watered and de-

mineralised)5

6 Low grade industrial burner oils (filtered and de-watered) 3

There is obvious potential for similar levy-benefit arrangements to be introduced forother waste products.

PART 4 TRANSFER OF EXCISE FUNCTIONS FROM CUSTOMS

The collection of excise revenue was the responsibility of the Australian CustomsService (Customs) until 1998, when the responsibility was transferred to the ATO.This transfer of function was in accordance with the Taxation Laws Amendment(Excise Arrangements) Act 2001.

There were a number of functions transferred from Customs to the ATO, including:

• Administration of the Diesel Fuel Rebate Scheme (DFRS);• Responsibility for policy and compliance pertaining to Excise Revenue

Collection, including Tobacco, Petroleum and Alcohol;• Licensing functions; and• Administration of concessional excise arrangements.


The transfer has divided responsibility for the Excise Act (administered by the ATO)and the Customs Act (administered by Customs). Locally produced productstherefore pay duty under the excise arrangements, while equivalent products, ifimported, pay duty under the customs arrangements.

Imported petroleum products are liable for duty of around $1 billion per annum.However, the vast majority of this product is transferred to the excise regime for usein further manufacture and thus eventually pays excise duty. Actual customs dutypaid on petroleum products is around only $40 million per annum.

The collection of duty for imported goods is administered by Customs. Those goodswhich would be liable for excise if locally produced are referred to by the ATO as�excise equivalent goods� (EEG). While in certain instances equivalent importedgoods can be treated as excisable goods, for the most part the regime for thesegoods continues to be separate to that for excisable product.

The division of administration of excise and customs duty for �like� importedpetroleum products has established two administrative agencies with differentlegislation, business systems and powers to enforce compliance. This mayexacerbate inconsistencies in the system with the potential for excise evasion.Clients have also stated that the requirement to operate under dual systems maycreate higher compliance costs than would otherwise be the case.

PART 5 LICENSING

There are two types of licences and three types of permissions that are relevant topetroleum excise licensing arrangements.

Customs is responsible for the legislation and policy governing the issue ofWarehouse Licences for storage of imported goods and the ATO is responsible forthe legislation and policy relating to issuing of Excise Manufacture and Storagelicences.

Customs Warehouse Licence � allows the storage of all imported goods, includingexcise equivalent goods. Customs charges an annual licence fee of $7,000 perwarehouse. This charge reflects the cost of issuing the licence, complianceincluding record checks and annual audits.

Excise Manufacturer�s Licence � authorises the licence holder to manufacturespecific excisable products in the premises specified on the licence. All refineries,as well as other businesses that produce or blend petroleum and oil products arerequired to be licensed and pay duty at the appropriate rate. Until recently, anexcise manufacturer�s licence was required to be reviewed on an annual basis andattracted an annual licence fee of $10.00. This fee was recently removed.

Excise Storage Licence � allows the licence holder to store specific excisableproducts on which excise duty has not been paid (underbond goods) that are theproperty of the licence holder or another person/company in the premises specifiedon the licence. An excise storage licence does not require annual renewal and isexempt from any fee.

Weekly Settlement Permission - provides for a 7 day cycle � from Monday to Mondayfor excise due and payable on manufacture of an excisable product. This allows the


delivery of certain goods into home consumption without having to lodge an entryor pay the excise duty liable until the Monday following delivery. Currently, allpetroleum companies pay duty under this permission. Requests for permission aremade to the ATO in writing. The permissions are renewed on an annual basis.

Single Transaction Permission � allows the one off movement of underbondexcisable goods from one licensed premises to another licensed premises asspecified in the permission. Each time goods are moved an application form isrequired to be lodged with the ATO and approval granted prior to the movement ofgoods. While the goods are moved underbond they remain the responsibility of thelicensee. The duty liability for these goods transfers to the receiving bond once thegoods are received and written into the records of that bond.

Continuing Permission � allows the movement of goods underbond on a regular orcontinuing basis between licensed premises as specified in the schedule of thepermission without the need to approach the ATO for individual authority in eachcase. Continuing Permission does not require an annual renewal, however requestto amend the schedule must be made in writing.

Previously, licensing operations were centralised with the Excise Licensing Grouplocated in Sydney. A recent review recommended that the function be decentralisedand placed with the individual Industry Groups of petroleum, alcohol and tobacco.This recommendation has been accepted and implemented and the PetroleumIndustry Group in Melbourne is responsible for all petroleum excise licensing.Although responsibility for excise licensing is with the ATO, licences continue to beproduced using a Customs IT system until excise collections are transferred to ATObusiness systems (discussed further in 6.1.2).

PART 6 ATO REFORM AGENDA FOR EXCISE BUSINESS

The transfer of excise functions from the Australian Customs Service to theAustralian Taxation Office, along with increasing demands for reform of what waswidely acknowledged to be an outdated legislative and administrative system, hasresulted in the development of a modernised business plan for excise. Current andfuture reforms reflect the principles of the Taypayers� Charter, the ATO ComplianceModel and A New Tax Office for A New Tax System, with the aim of integrating withgeneric ATO systems and procedures wherever possible.

The reforms are also cognisant of industry developments and the need to minimiseexcise clients� compliance costs. The aim is to reflect modern administrativepractices and commercial reality wherever possible.

The modernisation of excise business will be incremental. Some reforms, such asthose described below, will be implemented in the short term, while more complexchanges will require longer term planning and design.


6.1 Current reforms

6.1.1 Business Redesign Project

This project was developed to guide the transition of current and new exciseactivities to a new excise business model that encompasses the Excise BusinessPrinciples. The new Excise business model is based on the ATO�s assurance modelwhich takes a risk based, self assessment approach to taxation.

The new approach is based upon the use of systematic client profiling to achieve abreakthrough in managing risk. Together with a new, differentiated automatedtreatment regime, the approach is aimed at reducing compliance costs for taxpayersand also achieving cost reductions in ATO processing. A further objective of theapproach is to support a flexible and quick response to government inimplementing new payment and revenue schemes.

The new model is aimed at developing the capability to deal with ATO clients asindividuals differentiated on the basis of their behaviour, risk assessment andpreferred methods of interaction with the ATO. The approach also involves a morerigorous application of the Taxpayers' Charter and the ATO Compliance Model inproviding an alternative model for client interaction with the ATO. Promotingcommunity confidence is also a key aspect of the proposed approach.

The main focus at this time is on the development of designs for client profiles andrisk processes which are capable of providing the level of compliance assurancerequired to support implementation of differentiated service to Excise clients.

The project is in the early phases of a proof of concept and if these concepts bearfruit they will:

• decrease the effort and cost of compliance for both clients and the ATO;• provide a more tailored and choice based interaction between the client and the

ATO; and• provide an increased service focus.

6.1.2 Excise Collections Project

Although responsibility for excise business was transferred to the ATO in 1999,Customs continues to process the excise revenue on Customs IT systems under anadministrative arrangement with the ATO. The ATO has initiated the ExciseCollections System Project to develop the ATO�s IT system and business processcapability for excise collections. This new business processes and informationtechnology system will provide a range of benefits to clients, the ATO and toGovernment.

As part of the change process, excise business processes and policies will beadapted to the ATO environment. This includes alignment with the Taxpayers�Charter, the ATO Compliance Model and the Excise Business Principles. Theseprinciples actively promote self assessment, minimising transactions, and ease ofclient interactions.

The new system will simplify and streamline the excise collection function. It willfacilitate the analysis of data and improve the risk assessment processes. The


system will automate processes which are currently largely manual and will allowfor the provision of an electronic service to clients.

There will be a number of different business processes which will facilitate ease ofinteraction with the ATO for clients. The options that will be available includeelectronic options, particularly web based and the business to governmentapproach, for submitting returns and claims.

New forms are being developed with the same look and feel of other ATO forms. Toaccompany the new forms, a comprehensive guide will be available to assist clientsto complete the forms step by step if needed.

A comprehensive client education program covering the new excise collectionsystem will be launched in May 2002. Phase one of the Excise Collection Project isscheduled for implementation in July 2002.

6.1.3 Generic Payments System

Excise has developed a Unified Grants Code legislative framework for the paymentof grants. This is complemented by the Generic Payments System (GPS) IT systembuilt for processing claims and which provides for the ongoing administration ofthree existing Excise Grant/Rebate schemes � DFRS, FSGS and PSO.

The benefits of GPS for clients are:

• Standardised processes, including forms, offering consistency to clients; and• Access to the Electronic Lodgement Service and Electronic Commerce Interface

for claims.

The benefits of GPS for administration of payment schemes are:

• A �whole of client� approach for management of Excise clients;• Ability for Industry Groups to reduce compliance costs through more

sophisticated reporting mechanisms;• A single Excise workforce for administration of the schemes � allows multi

skilling and mobility to cater for peaks and troughs;• Maximising the use of the ATO registry workforce to process all scheme

registration; and• Ability to implement system changes and adopt new schemes rapidly.

6.1.4 eGrant

eGrant is a new way of claiming grants and rebates. It is being developed initiallyfor DAFGS clients. eGrant reflects the technology developments and trends thatexist in modern business.

The purpose of eGrant is to simplify the claims process for clients, by providing anopportunity to move from preparing paper claims to using an automatic �Point ofSale� based process. The major objective of eGrant is to capture �naturaltransactions� thereby removing the need for clients to prepare and lodge claimforms. The initial mechanism for capturing �Point of Sale� information will be a fuelcard, however, any mechanism that can capture information on the fuel transactionat the point of sale could be used.


Clients can then authorise their fuel card provider(s) to pass the details of theireligible fuel transactions to the ATO.

The fuel transaction information will be forwarded to the ATO by the fuel cardprovider as part of the fuel card provider�s regular invoicing cycle. The ATO will usethis information to construct claims and make subsequent payments to clients.

The majority of fuel card holders are on monthly invoicing cycles. Clients who useeGrant will see improved cash flow as their payments will generally be receivedbefore they pay for their fuel.

Fuel card providers have been invited to participate in eGrant and have beenprovided with detailed specifications.

The first release of eGrant (a pilot for DAFGS clients) will commence in April 2002.

6.2 Future reforms

There has been widespread support over the past decade for simplification andtransparency in regard to tax legislation (Taxation Law Improvement Project, A NewTax System and the Review of Business Taxation or �Ralph Report�). The exciselegislation is 100 years old. It is complex and does not reflect contemporaryadministrative practices. The modernisation of this legislation, in line with theprinciples articulated in the above reports, is considered necessary to promotesimplicity, certainty and lower compliance costs for both government and industry.

Work is underway on designing a simple, overarching legislative framework,comprising both revenue collection and business payments regimes, which appliesa consistent administrative philosophy, and provides the flexibility necessary toaccommodate new policy initiatives and changing industry practices.

Currently the ATO is identifying the features of an improved administrative model,and will be consulting with clients in the near future about possible models.

It is expected that implementation will be undertaken in an incremental mannerover the next 2-3 years.


APPENDIX A

Excise Duty Rates effective on and from 1 February 2002Duty rates applying to Excise Items following the December 2001 CPI

Effective on and from 1 February 2002

June 2001 indexno.

133.8

December 2001index no.

135.4

Factor 1.012

Item Commodity Unit* Old Rate New Rate

Beer and other Excisable Beverages < or = 10% alc/vol

1C1a Beer, in individual containers not exceeding48 litres, not exceeding 3% by volume ofalcohol

La $ 44.92 $ 45.46

1C1b Beer, in individual containers not exceeding48 litres, exceeding 3% but not exceeding3.5% by volume of alcohol

La $ 38.13 $ 38.59

1C1c Beer, in individual containers not exceeding48 litres, exceeding 3.5% by volume of alcohol

La $ 32.83 $ 33.22

1C2a Beer, in individual containers exceeding 48litres, not exceeding 3% by volume of alcohol

La $ 16.26 $ 16.46

1C2b Beer, in individual containers exceeding 48litres , exceeding 3% but not exceeding 3.5%by volume of alcohol

La $ 17.66 $ 17.87

1C2c Beer, in individual containers exceeding 48litres, exceeding 3.5% by volume of alcohol

La $ 23.11 $ 23.39

1D Other excisable beverages, of an alcoholicstrength not exceeding 10%

La $ 32.83 $ 33.22

Spirits and other Excisable Beverages > 10% alc/vol

2A Brandy La $ 51.92 $ 52.54

2 C Fruit Brandy La $ 55.60 $ 56.27

2 D Whisky La $ 55.60 $ 56.27

2 F Rum La $ 55.60 $ 56.27

2 G Liqueurs La $ 55.60 $ 56.27

2 H Other excisable beverages, of an alcoholicstrength exceeding 10%

La $ 55.60 $ 56.27

2O Spirits, not elsewhere included La $ 55.60 $ 56.27

Tobacco Products

6A Tobacco, in stick form not exceeding 0.8grams per stick tobacco content

no $ 0.20645 $ 0.20893

6B Tobacco, other kg $ 258.06 $ 261.16

7A Cigars, in stick form not exceeding 0.8 gramsper stick tobacco content

no $ 0.20645 $ 0.20893

7B Cigars, other kg $ 258.06 $ 261.16

8A Cigarettes, not exceeding 0.8 grams per sticktobacco content

no $ 0.20645 $ 0.20893

8B Cigarettes, other kg $ 258.06 $ 261.16

9 Snuff kg $ 2.10 $ 2.13

Heating Oil and Kerosenes

11A Kerosene, for use as aircraft fuel Li $ 0.02845 $ 0.02845

11B1a Kerosene, for use as fuel in an internalcombustion engine ("ICE")

Li $ 0.38143 $ 0.38143

11B1b Kerosene, for use as fuel other than in an ICE Li $ 0.07557 $ 0.07557


11B2a Heating oil and kerosene for use as fuel in anICE

Li $ 0.38143 $ 0.38143

11B2b Heating oil and kerosene containing markerfor use as fuel other than in an ICE

Li $ 0.07557 $ 0.07557

11B2d Heating oil and kerosene, other Li $ 0.38143 $ 0.38143

Diesel and Fuel Oil

11C1a Diesel Li $ 0.38143 $ 0.38143

11C2a Diesel, in packages exceeding 210 Li Li $ 0.38143 $ 0.38143

11D Fuel Oil Li $ 0.07557 $ 0.07557

Condensate, Stabilised Crude and Topped Crude

11E1 Condensate, for use as fuel in an ICE Li $ 0.38143 $ 0.38143

11E2 Condensate, containing marker for use as fuelother than in an ICE

Li $ 0.07557 $ 0.07557

11E4 Condensate, other Li $ 0.38143 $ 0.38143

11F1 Stabilised crude petroleum oil, for use as fuelin an ICE

Li $ 0.38143 $ 0.38143

11F2 Stabilised crude petroleum oil, containingmarker for use as fuel other than in an ICE

Li $ 0.07557 $ 0.07557

11F4 Stabilised crude petroleum oil, other Li $ 0.38143 $ 0.38143

11G2 Topped crude petroleum oil, for use as fuel inan ICE

Li $ 0.38143 $ 0.38143

11G3 Topped crude petroleum oil, containingmarker for use as fuel other than in an ICE

Li $ 0.07557 $ 0.07557

11G5 Topped crude petroleum oil, other Li $ 0.38143 $ 0.38143

Gasoline/Other Petroleum or Shale Spirit

11H1a For use as fuel in aircraft Li $ 0.02808 $ 0.02808

11H1b Lead content exceeding 13 m/Li, for use asfuel other than in an aircraft

Li $ 0.40516 $ 0.40516

11H1c Lead content not exceeding 13 m/Li, for useas fuel other than in an aircraft

Li $ 0.38143 $ 0.38143

11H1d For other use Li $ 0.38143 $ 0.38143

11H2a For use as fuel in aircraft Li $ 0.02808 $ 0.02808

11H2b Lead content exceeding 13 m/Li, for use asfuel other than in an aircraft

Li $ 0.40516 $ 0.40516

11H2c Lead content not exceeding 13 m/Li, for useas fuel other than in an aircraft

Li $ 0.38143 $ 0.38143

11H2e Other, lead content exceeding 13m/Li Li $ 0.40516 $ 0.40516

11H2f Other, lead content not exceeding 13m/Li Li $ 0.38143 $ 0.38143

Other refined or partly refined petroleum products, etc.

11I1b(ii) Recycled, nei, for use as fuel in an ICE Li $ 0.38143 $ 0.38143

11I2a Other petroleum products, for use as fuel inan ICE

Li $ 0.38143 $ 0.38143

11I2b Other petroleum products, for use as fuelother than in an ICE

Li $ 0.07557 $ 0.07557

11I3a Other petroleum products, for use as fuel inan ICE

Li $ 0.38143 $ 0.38143

11I3b Other petroleum products, containing marker,for use as fuel other than in an ICE

Li $ 0.07557 $ 0.07557

11I3d Other petroleum products Li $ 0.38143 $ 0.38143


Coal tar and coke oven distillates, etc

11J1a Lead content exceeding 13 m/Li Li $ 0.40516 $ 0.40516

11J1b Lead content not exceeding 13 m/Li Li $ 0.38143 $ 0.38143

11J2a Lead content exceeding 13 m/Li Li $ 0.40516 $ 0.40516

11J2b Lead content not exceeding 13m/Li Li $ 0.38143 $ 0.38143

Petroleum based oils and lubricants, not for use as fuel

15A Oils, excluding greases Li $ 0.05299 $0.05363

15B Recycled oils, excluding greases Li $ 0.05299 $0.05363

15C Greases Kg $ 0.05299 $0.05363

15D Recycled greases Kg $ 0.05299 $0.05363


APPENDIX B

EXCISE PETROLEUM RELATED LEGISLATION ADMINISTERED BY THE ATO

! Excise Act 1901 (and regulations)! Excise Tariff Act 1921! Fuel (Penalty Surcharge) Administration Act 1997! Fuel Sales (Penalty Surcharge) Act 1997! Fuel Misuse (Penalty Surcharge) Act 1997! Fuel Blending (Penalty Surcharge) Act 1997! Product Stewardship (Oil) Act 2000! Product Grants and Benefits Administration Act 2000! Diesel and Alternative Fuels Grants Act 1999 (and regulations)! Fuel Sales Grants Scheme Act 2000 (and regulations)! Coal Excise Act 1949


APPENDIX C

EXCISE STATEMENT OF BUSINESS PRINCIPLES

Excise is designing and implementing a self-assessment based payment andcollection system that:

! Minimises our involvement in transactions;! Maximises the ease of client interaction; and! Provides assurance to clients, community and government that the system is

working effectively and is sustainable.

Definitions

Self-Assessment means:

! We expect our clients to tell us what they think they should pay/get paid;! We will pay or collect from them subject to our assurance plan.

Minimise our involvement in transactions means:

! We will leverage off existing information sources including client transactionswith government, and have a seamless information gathering client interface;

! We will minimise manual transactions.

Ease of client interaction means:

! Clients will be provided with a choice of ways to interact with the ATO;! We will link with existing internal and external systems to avoid overt additional

transactions for the client;! We will provide our clients with tools and resources to help them;! We will minimise the amount of material required from clients subject to our

assurance plan.

Assurance means:

! The ATO and others are confident that systems perform to defined standards.This broadly means:

! People receive the right money;! People pay the right money.

This will be achieved by:

! Relying on self-assessment data supported by testing;! Using a variety of information sources to ensure health of the system;! Embedding assurance processes, building them from start to finish;! Building a separate capability to provide confidence based on risk criteria.

Documents

AUSTRALIAN TAXATION OFFICE SUPPORTING BACKGROUND DOCUMENT TO THE